Ukraine reduces starting price for 25% stake in Sumyoblenergo

Ukraine’s State Property Fund is going to offer a 25%
stake in power distribution company Sumyoblenergo (SOEN UZ) on the PFTS stock
exchange on March 30, according to its official newspaper released on Feb. 26.
The stake will be tendered at a starting price of UAH 106.3 mln, or at a 71%
discount to the starting price at the previous auctions scheduled for August
2017. Recall, the fund found no bidders for 25% stake in Sumyoblenergo at an
Aug. 23 auction, nor at the auction rescheduled for Aug. 30.

Last week, the fund also scheduled an auction to sell
25% in another power DisCo, Odesaoblenergo (ODEN UK), on March 20 at a starting
price of UAH 149.1 mln. This price is also at a deep discount to what the fund
offered last August (UAH 631.3 mln).

In August 2017, the fund was able to sell five of
eight offered 25% stakes in electricity companies, all of which were purchased
by companies related to DTEK of Rinat Akhmetov. But it found no demand for the
stakes in three companies, including the above-mentioned power DisCos and power
GenCo Donbasenergo (DOEN UK).

Alexander Paraschiy: The offered prices look potentially interesting for portfolio
investors, especially given that Ukrainian power DisCos are on the verge of
shifting to RAB-based rates. For instance, if Sumyoblenergo shifts to RAB-based
regulation, we estimate it will be able to generate annual regulated profit of
UAH 941 mln over the next three years. Such profit by far exceeds the MCap
implied by the starting price of the privatization auction.